Hiring Down at Small Businesses

Oct. 4, 2005--After six months of solid job growth, hiring by small businesses dropped off in September in the wake of Katrina and Rita, a national survey of payroll data showed.

Despite the declines, small businesses have increased overall employee headcounts by 0.4% from the start of the year through September, according to a survey by SurePayroll, a payroll processing firm.

"I'm amazed at the resiliency of small business owners," said SurePayroll president Michael Alter, referring to the ongoing strength of small business activity amid rising energy costs, higher salaries, a devastating storm season and lower consumer confidence. "I wouldn't say it's booming, but things are chugging along," Alter said.

Those conditions knocked SurePayroll's so-called scorecard hiring index down by 0.13% from August, to 10,480 nationwide. The bulk of the decline came from sudden job losses in the South after Hurricane Katrina, the survey showed.

As a result, year-to-date growth in small business hiring has steadied out at 0.4%, which tracks to an annual growth rate in hiring of about 0.6% for 2005, Alter said. September was only the second month in almost two years that saw cutbacks in small business hiring.

By region, hiring in both the South and the Midwest were down, by 1.5% and 3.2% respectively. By contrast, jobs soared by 8.4% in the Northeast, the fourteenth consecutive month of growth. Hiring in the West was also up for the second month in row.

While jobs were down in the South, average salaries increased to $26,435, the highest level since November 2004. Nationwide, salaries have dropped 2.1% through September, for a projected annual decrease of 2.8% for 2005.

Though too early to tell, Alter said, this might suggest the threat of prolonged salary deflation is dwindling.

Small businesses account for up to 80% of net new jobs every year, representing over 90% of all employers nationwide, and more than half of those in the private sector.

The PayRoll Small Business Scorecard is based on payroll data from over 15,000 small businesses across the country.